Here’s How eBay Can Benefit From Its African Expansion

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eBay (NASDAQ:EBAY) recently entered into a partnership with  an African online shopping start-up MailforAfrica.com, which will allow American eBay sellers to sell their merchandise to African consumers. The new arrangement, which is  termed as “eBay Powered by MailforAfrica”,  will enable inventory from all eBay U.S. individual and business sellers with a 300+ rating to be purchased by buyers from Nigeria and Kenya. The company plans to add other African countries starting with Ghana to this platform in future. Demand for foreign products is increasing in Nigeria and a recent market study revealed that shop owners stock their stores with over 80% of imported items to stay relevant in the market. eBay’s new partnership gives American sellers access to this growing market and this should eventually lead to an increase in the number of active sellers on its platform, as they get easy access to developing regions which are otherwise difficult to penetrate.

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Access To African Markets Can Increase Number of Active Sellers

Africa is an emerging market for U.S. sellers, one that displays increasing demand for foreign goods and a rapid growth in E-commerce. According to a McKinsey report, online sales in Africa are expected to reach $75 billion by 2025, a significant increase from the $ 8 billion number in 2014. Tapping this high growth market through eBay’s platform can prove to a boon for U.S. sellers. MailforAfrica’s platform will handle logistics and payments for eBay’s products, solving several challenges which are faced by sellers to enter this market.  This convenience and access to a growing market offered by eBay’s partnership with MailForAfrica should attract more sellers to its platform.

According to our estimates, the number of active users on eBay’s platform, which is a key driver of its valuation, will increase steadily from 165 million in 2016 to around 205 million by the end of our forecast period.

There can be a 10% upside to our price estimate, if this number increases at a faster pace and reaches around 230 million by the end of our forecast period.

As eBay works on a turnaround plan, the company is taking several steps to attract more users to its platform. Logistics support, better branding, a richer inventory of products and access to unique products are some of these measures. The African market for consumer goods is seeing a growing demand for foreign products. We believe providing access to this market will act as an enabler for eBay to attract more sellers on its platform, driving revenue growth over the long term.

 

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